Today I am going to talk about how we use price action to identify our key entry points when day trading. What most novice traders do when day trading is that they fail to understand the need for patience. Instead of waiting for the proper set ups and for prices to reach our key entry points, they are constantly looking to enter the market. When you are continually looking for trade entries, you are in essence gambling. There are actually anywhere from 5 to 15 key entry points each day in the ES (mini S&P) that offer a very high probability trade entry. These key entry areas are very strong entry areas that occur every day and they rarely fail, so if you can learn to spot them while having the patience to wait on them, you can improve your trading results exponentially! This is where most of the best moves occur at each day, so you must learn to spot them.
A seasoned trader that can actually read a chart and understand price action can often times merely glance at the chart and spot the areas where the best trades are most likely to set up. The reason is because they understand price action and they understand what prices are doing as they print to a chart. Most traders think the market is completely random and that there is no way to have any idea of what prices are doing, much less where they are likely to go over the next hour or two. You can have access to all of the fancy indicators, trade stations and fail proof trading ideas you can dig up, but if you don’t know how to read a price chart and have an understanding of what prices are doing and why as they print to your chart, then you are never going to consistently make money trading.
You really don’t need any indicators or any special tools to make money day trading. All you need is a good charting service with good data, an understanding of price action and the ability to draw both horizontal and angled trend lines. Using these tools only, I can out trade 99%, if not all, of the retail traders that you can bring to the table; guaranteed. I can say this confidently, because myself and a few other traders that I work with do this on a daily basis. What we have, in addition to patience, is an understanding of price action. Nothing more and nothing less. Once you have this knowledge, then you just have to learn to have the patience to ignore everything on the chart except the key entry points that will set up good trades every single trading day.
I found an article on patience at www.smbtraining.com and it had something familiar to say about being patient and waiting on the key entry points. It sounded much like the same things I’m always saying, so I though it would be good if you heard it from someone that trades other than me. Below is a small excerpt from that article.
Patience is a core skill for any trader, and for a momentum/scalp trader like myself, adding some more patience to my game has been a hard challenge to tackle. As I mentioned in my blog last week, one of the major adjustments I have made to my trading is that I am being far more selective with my setups, and I am holding positions for longer periods of time. Instead of making dozens of trades in one stock throughout the day, I am searching for one or two good risk/reward plays across a basket of stocks and ETF’s, and making just one or two trades in each.
As I continue to follow the market and adjust my trading to new market conditions, I am finding that being patient is just as much about waiting for your entry point as it about waiting for your exit point. “No one ever went broke taking profits” is one of the more overused clichés in trading and investing. It might be true, but I can assure you that having a solid plan for each trade, one that matches a high probability setup with a good risk/reward ratio is far more important than simply always booking small profits. As you are trading and holding a position, you will often have to resist the urge to take your profits out of the market if it is not in accordance with your plan and your stock has not yet reached your planned target. If you are always booking small profits, you may find it difficult to make money in the long run, as your many small wins may simply not be enough to cover your losses. You can read the rest of the original article here.
If you can take the time to study price action and price charts without all of the clutter and confusion that comes from multiple charts, worthless indicators and any of the other rubbish that is often taught by the so called “guru traders,” you can eventually learn the same skills that we use at price action trading system to spot the key entry points in advance. If you want to look at a price chart while prices print to it in real time, and also have an understanding of what’s going on and why, then you can do that with our price action trading strategy. It won’t come easy for most of you, and it won’t happen over night either, but in the end, you can succeed at becoming a profitable day trader rather than being the next statistic in the failure column. It will take hard work, extra effort and lot’s of study time and chart time to gain the necessary experience, but in the end, you will learn to trade profitably if you stay with it.
The ultimate entry points for profitable trades are almost always an entry in the opposite direction as prices approach key support and resistance areas. These support and resistance areas can be flat horizontal lines, or they can be angled trend lines. Make no mistake though: The best moves with the least amount of risk will almost always occur off of these lines, so learning how to find these lines is paramount. It’s not as easy as simply learning to spot the lines though, as there are some additional rules that are always present for trading price action strategies, so you must understand and learn the rules to go along with the support and resistance lines. Once you gain the knowledge of price action trading, you will then have the skill set to draw these lines and then simply wait patiently for prices to reach these areas before entering a trade. You can then learn to be patient and wait on prices to come to you, rather than you chasing prices and regretting the majority of your failed entries.
If you would like to learn how we use price action to identify our key entry points, then we can help you. You can find more information at http://priceactiontradingsystem.com/pats-price-action-trading-manual. Don’t continue to waste your time and hard earned money on worthless indicators and the other “holy grail” trading ideas that are usually not worth the paper that they are printed upon. Get started today and learn to use price action trading rules to change your trading for the better!